What is disability insurance? To start off, disability insurance is simply a policy which covers some of a persons’ income that they have lost due to being unable to work in the case of injury or illness.

Some providers may give coverage for a shorter period which can only be a few months, whereas others will provide benefits for decades!

Which of these two cases is viable will depend on things such as the budget, expectations, and the needs of the individual as well. These are the primary factors that will influence the need for short term or short term coverage.

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Which Do You Need?

Choosing if you need disability insurance is no walk in the park, you will need to decide which is the right one for you. You should always consider simpler methods first. In some cases, using savings can be easier, especially for short-term cases.

If you have enough savings laid aside then you can use these to cover expenses for a few months instead of taking out a short-term insurance claim.

If you do not have adequate savings, or any at all, then short term insurance for disability is a form of financial protection that is essential to you, even if the disability is only a very short period.

If you have savings, then you should consider how a long term disability may impact your overall financial wellbeing as well as your plans for retirement.

If you were to end up being permanently disabled, would you be able to cover your required living expenses until you retire? In the case that you would not be able to (which is likely for many) you should consider looking into long term protection for disability.

Pros & Cons Of Short Term Disability Insurance

This is a benefit scheme for those who are unable to work for a brief period of time due to accident, injury, or illness that has made them incapable of doing so.

These policies can last up to 2 years, however a standard policy is only a few months.

Let’s consider the advantages and disadvantages of this.

Pros

  • The most affordable option for most.
  • Begin paying you benefits very quickly once you have become temporarily disabled.
  • Pay close to 100% of your typical salary for the first set of payments.

Cons

  • Benefits will cease after a few months, leaving you on your own in the long run.
  • Few options for payouts in some circumstances, such as; death, or disability close to retirement.

Pros & Cons Of Long Term Disability Insurance

Long term insurance for disability gives monthly payments lasting over half a year, some can even continue until you reach 75 years of age or more.

Pros

  • Peace of mind for you, knowing you will receive up to 70% of typical salary as long as the disability is present.
  • Covers hospital stays.
  • Can add supplemental insurance to raise payments.

Cons

  • It Costs more in the long run than short term insurance.
  • Waiting period for 3-6 months before you will start to receive benefits.
  • Payment plans may change after 2 years of constant disability.

Choosing Which One Is Viable

Both of these types of insurance will give different types of coverage. Some workers may be able to afford both in order to be totally covered should they end up with a disability, however, this is a long shot, and the costs are very high.

So, for the vast majority of us, you will need to choose one type of coverage, and most will usually opt for long term coverage, and be dependent on savings for the first few months of a disability.

Hence, we will show you some guidelines that cover the aspects of either type of coverage, so you can decide which is the most beneficial for you and which is more applicable for your situation.

Long Term

  • Benefits can last for a duration of up to 75 years of age.
  • There is a waiting period before the benefits start. This waiting period can be up to two years, but the average is around 3-6 months.
  • You can receive up to 70% of your salary with this benefit.

Short Term

  • Benefits can last for a duration of up to 2 years.
  • There is a shorter waiting period typically from 0-14 weeks.
  • You typically receive around 80% of your salary for the first few sets of payments, however, the remaining payments usually end up being lower.